Obama's True Regulatory Record

“I’ve approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his.” ~ President Obama, January 2012 State of the Union Address

Whenever any politician makes a comparison such as this any voter must stop and think before they make judgment.  One must evaluate the “footnotes” of any statistic to determine a) the validity of the number, and b) its true meaning.

Between 2009 and 2011, 10,883 rule-making proceedings were enacted (according to the Federal Register – the “bible” of Federal regulatory rule-making).  In Bush’s first three years, 12,447 rules were enacted.  As such, it would appear that President Obama’s SOTU Address statement was correct.  However, before we can declare a statement of affirmation, we must investigate the “footnotes”.

An EPA rule mandating the use of pens instead of pencils has a vastly different effect than an EPA rule restricting the level of carbon-emissions permitted for electricity generation.  In addition, a rule can actually ease regulation, which would therefore have a net positive effect on the economy.  As you can see, no two regulations are alike.  Therefore, while on face value Obama looks quite decent, if we boil down deeper, his regulatory record increasingly looks inadequate.

First, a good measure of true regulatory intent is not only the actual number of rules, but the percent change in rule-making.  This tells us whether rule-making is accelerating or decreasing over a time period.  In Obama’s first three years, rule-making increased almost 9% compared to just 0.4% in Bush’s first three years.  It is even worse on proposed rule-making, where Obama saw a whopping 42% increase compared to just 1% for Bush’s first three years.  Even if we compare across similar economic environments (Obama’s first three years compared to Bush’s last three), the picture does not improve for Obama.   Bush’s last three years saw rule-making increase just 3% and proposed rule-making increase 5.5%, both far below Obama’s first three years.

Second, the magnitude of regulations is the really important issue.  Like the pens vs. pencils compared to carbon-emissions example, the regulations can either have an insignificant or significant impact on the economy.  Economically significant regulations are those that have at least a $100 million impact. Obama’s economically significant regulatory record pales in comparison to Bush’s.  Obama’s first three years saw 177 economically significant rules enacted compared to just 126 in Bush’s first three years.   Roughly 2% of Obama’s enacted rules have been economically significant ones compared to just 1% of Bush’s.

Third, as mentioned, some rule-making actually decreases the regulatory burden; therefore, an important piece is the ratio of “easing” rules to “burdening” rules as well as the overall net burden cost of the economically significant regulations.   Of the 3,807 rules imposed in 2011, only 5 could be classified as “easing” rules.   If we compare Bush’s net burden to Obama’s net burden, the regulatory climate becomes even more oppressive.  Obama’s net burden for his first three years amounts to $46 billion compared to just $8.1 billion for Bush’s first three years—almost a 6 to 1 ratio.

Fourth, regulations do not just affect businesses and individuals; it also affects the overall size of government.  In order to enforce the rules, the government must employee people in its agencies and must appropriate money to the agencies.  Therefore, an increased regulatory burden on the economy also lends itself to an increased size in government employment and spending.  The chart below shows regulatory agency outlays and employees from 2000 to 2010.  We see an increase in the early 2000’s representing Bush’s first years but then both outlays and employees remains consistent until Obama, where it begins to increase again. Obama’s tenure has thus far seen both more spending and more hiring among the regulatory agencies than at any point in American history.

In summary: On face value, Obama has enacted fewer rules than Bush during their respective first three years.  However,

1. Obama’s percent change in rule-making far exceeds Bush’s first three years and last three years.
2. Obama has enacted more economically significant regulations compared to Bush (both in real numbers as well as a share of total rules).
3. Obama’s net regulatory burden far exceeds Bush’s by a ratio of 6 to 1.
4. Obama has presided over the highest level of regulatory agency outlays (i.e. spending) and employment.

As elections near, politicians love to rewrite history; however, most of the time the facts just do not line up.  After examining the “footnotes,” we clearly see Obama has further increased the regulatory burden we all must live under.   Instead of burdening the economy to achieve some sort of paternalistic social goal, government should enact smart regulation – regulation that corrects the market failures’ problem, not its symptoms, while fostering economic growth and maximizing social efficiency.

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